Fastest response time, large distribution and collection network coupled with high risk appetite and complete geographic, customer and asset classes' inclusion gives as an edge over competition in retail segment financing, says Pratap Paode, Chief Executive Officer, SEFC. Excerpts from the interview.

How do you assess the current CE market scenario and its growth prospects?
Undoubtedly, the government is taking steps to expedite project clearances and also clearing various bottlenecks related to environment, land acquisition, etc, but visible results are still far away. Coupled with this is the high interest cost and banks/FIs not being very comfortable in taking more exposure on road and power projects, all adding to the woes. Mining, port activities, real estate continue to have negative impact on construction equipment off-take. Growth in the CE market is expected to remain muted for the next two quarters and probably for the next 15-16 months. However, by the end of 2014, we should be back to over 20 per cent growth rate and that should be sustainable for the next four years, unless there are any local or global surprises.

Which are the major areas to be addressed on a war footing?We have been saying it time and again, that the government has to take an active role and responsibility in clearing and ensuring speedy implementation of projects, particularly in roads, power and irrigation. This will have a positive bearing on GDP growth apart from the fact that the CE industry will certainly benefit. The state and central government also need to iron out issues and reconsider the ban on mining activity, which has adversely impacted the country's growth and revenues.

What is SEFC's strategy to sustain the growth momentum?
Devaluation of currency has certainly put a strain on contractors and financial institutions who had partially hedged ECBs. It has also impacted many manufacturers who had lower indigenisation and high dependence on imported parts. Industry being down and competition being fierce, it hasn't been possible to pass on costs to buyer and this has added profitability stress on such manufacturers.

We at SEFC, however, have purely local currency borrowing and thus are insulated from FX fluctuations. However, in the last three quarters, the cost of funds has steadily increased for all FIs and one can observe a strain on all balance sheets where stagnated or lower PAT is seen. High interest cost has also dissuaded many customers from fresh asset acquisitions and has been one of the reasons why replacement requirement of assets have reduced. At SEFC, we always make adequate provisions and have a cushion for variations in interest rates at the time of lending and hence are insulated from increase in interest cost by few basis points.

Given the intense competition and not-so-rosy demand-supply scenario, what has been SEFC's core focus?
Any mature market will have intense competition as a product over a life cycle becomes a commodity. It is at this point that the innovativeness and strategic market approach takes centrestage, for survival and continued growth. From the financing perspective, there still isn't a demand supply gap as in a struggling industrial growth situation; most lenders have adopted a conservative approach. This has in fact, made finance availability a challenge even for genuine buyers who do not have enough credentials to prove their credit- worthiness.

SEFC strongly believes in supporting such small and medium customers and this has paid rich dividends both in terms of profitability/growth and also earning customer loyalty.

What has been SEFC's overall performance so far in 2012?
In the last two quarters, we have grown both on asset size and net profits, keeping losses under control; and the progress is as per the plan. For the financial year, we will nearly double our net profit and also increase asset size by 65 per cent over the previous year.

We had anticipated a dip in market size for this financial year and had therefore, drawn a plan so that asset growth is restricted to 65-70 per cent while maintaining healthy portfolio quality.

How do you view growth potential three years down?
We see near zero percentage growth in the CE industry for the next financial year as delayed policy decisions, project clearances, availability of funds and the elections will have adverse impact. But the industry should recover to see 20 per cent YoY growth thereafter.

As regards SEFC, we will have portfolio growth in line with our past track as there is no point in derailment but will also keep delinquencies controlled in this intervening period. Once industry growth is on a recovery path, business will obviously be easy for all.

Brief us on SEFC's core competencies and strengths.
Fastest response time, large distribution and collection network, coupled with high-risk appetite and complete geographic, customer and asset classes' inclusion, all gives us an edge over competition in retail segment financing.

Could you talk about your geographical spread and product portfolio?
We are currently operating out of over 150 manned branches in the country, except a few excluded territories. On the collection side, we have over 550 collection points through our parent company branches and this network makes us one of the most widely spread financiers in the country. On the product side, we offer new equipment loans, refinance, loan switches, top-up loans, dealer trade finance, etc, and all these are tailored to meet customer requirements.

How healthy is the competition in this segment?
My take on competition amongst CE financiers is that it is very healthy and probably something other segments can emulate. Each NBFC/bank in this segment have well-defined operating parameters based on their risk appetite, distribution network and portfolio quality/expectations basis which customer segments and geographies are addressed with efficacy. SEFC, too, has chosen its niche segment in retail distributed financing and will mark its growth on this path.